Cash registers ring as DJs defies slump

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David Jones has given every indication that it will beat its profit forecast this year after a bumper third quarter when sales grew 5.4 per cent - much faster than anyone expected and defying suggestions that consumer spending has slowed.

DJs' normally cautious chief executive, Mark McInnes, said he was "delighted" with the sales figures. "And that's not something you hear from us very often."

He had cause to be pleased. DJs shares yesterday shot to their highest levels since July 1998, reaching an intraday high of $1.65 and closing 4¢ above the previous close at $1.62.

Sales of women's and men's clothing, accessories, footwear and home furnishings increased in the three months to April 24, but the electrical appliance category, where prices have tumbled as much as 20 per cent in the past year, weakened further.

Group sales totalled $381.4 million in the April quarter. For the nine months so far, sales are 3.6 per cent higher at $1.3 billion.

Mr McInnes said that, after stripping out an unusually big sales contribution from the newly refurbished store at Bondi in Sydney's east, DJs' portfolio still lifted sales about 2.5-3 per cent in the April quarter.

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Cost cuts were greater than expected, with the gains spent on TV ads and marketing to boost the David Jones brand.

Gross margins are in line with management forecasts, enabling Mr McInnes to repeat his earlier full-year profit forecast of $52-56 million before tax and before preference dividends.

But Mr McInnes declined to lift the profit target, saying trading this quarter would be hit by refurbishments at the flagship store in Sydney's central business district and the temporary closure of DJs' food hall in central Melbourne.

DJs and its department store rival, Myer, in recent weeks have run a stream of hotly competitive promotions designed to win back upper middle-class customers who, in recent years, deserted the chains in favour of specialist retailers.

Since Easter, both chains have run an almost non-stop series of promotions and they are now bidding for the Mother's Day dollar with high-profile advertising campaigns.

For the past two weeks, David Jones has run a Mother's Day promotion offering a watch valued around $110 to customers who bought more than $100 of full-priced clothing, footwear or accessories. But the offer was so successful that some stores ran out of watches early this week - six days before Mother's Day.